#55 Dissecting Drone Warfare, Funding the NRF, and the building blocks of good Industrial Policy
Ukrainian drones target Russia on the seas, The National Research Foundation’s Quest for Funding, Learning What it Takes to Execute an Industrial Policy
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Matsyanyaaya : Ukrainian drones target Russia on the seas
— Anushka Saxena
As the Russia-Ukraine war forges on, drone attacks have become central to Ukraine’s counter-offensive against Russia. Since June 2022, there has been a lot of reportage surrounding Ukraine’s use of suicide or kamikaze drones to damage or even sink Russian naval resources. Media research suggests that Ukraine has used unmanned underwater/ surface vehicles (UUVs/USVs), also known as ‘sea drones’, to conduct attacks against Russian frigates, warships, and other vessels in its Black Sea fleet. Ukraine also used air and sea drones to attack Sevastopol in Crimea, the base for Russia’s Black Sea fleet, in October 2022.
This month, Ukraine’s air and sea drone attack capabilities are back under the radar, with reports suggesting that on August 4, Kyiv attacked a Russian warship listing in the Black Sea from hundreds of miles away from Ukrainian territory. A source for CNN told the media house that the Russian warship, Olenogorsky Gornyak, was hit as it was being towed near the base at Novorossiysk, Russia’s largest port. The context for this can be drawn from the public warning Ukrainian President Volodymyr Zelenskyy issued last month, where he said: “Gradually, the war is returning to the territory of Russia – to its symbolic centres and military bases, and this is an inevitable, natural and absolutely fair process.”
Drone warfare is witnessing an elaborate discussion owing to illustrations from the Russia-Ukraine war, along with other technologies such as positioning visualisation software in artillery and missile systems and Electronic jamming techniques. Ukraine, in particular, has used commercial drone tech for surveillance, reconnaissance, and precision-guided attacks. The last one is evident from its attacks against the Russian Black Sea fleet. Ukraine might also be using the Turkish Kargu-2 anti-drone system, which is AI-enabled (autonomous).
Ukraine is now focusing on manufacturing its own suicide drones and loitering munition. Reportedly, according to the Ukrainian government, there are more than 200 companies officially manufacturing drones in Ukraine and hundreds more smaller-scale operations, like Midnight Lab. Midnight Lab makes products with a 3D printer and sources a lot of foreign technology to make AI-enabled drones, supposedly away from the radar of the Ukrainian defense ministry. However, it signals the efforts both public and private actors in Ukraine are undertaking to solidify national security using drones.
However, some analysts rightly argue that a ‘technological revolution’ in using these drones is yet to be witnessed, and Ukrainian examples show only the country’s boldness and audacity. That said, its use of drone attacks in successful cases demonstrates that Russian defense systems have the potential to be overwhelmed by swarms of loitering munition/ suicide drones, and will be focusing on amping up their defense strategy and domestic drone manufacturing capabilities to counter such attacks.
Cyberpolitik Explainer : The National Research Foundation’s Quest for Funding
— Satya Sahu
The Anusandhan National Research Foundation Bill, 2023 (ANRF) received assent from the Parliament recently, a fruition of a key recommendation made by the National Education Policy, 2020. While its objective of becoming a national coordinating agency between researchers, government bodies and private industry, is laudable, concerns raised about how it plans to revamp scientific R&D in Indian universities (including state universities) had remained unaddressed. Details surrounding implementation as well as funding and allocation processes are still unclear.
However, earlier last week, the National Centre for Biological Sciences hosted a webinar by Dr. Akhilesh Gupta, Secretary, SERB (Science and Engineering Research Board) and Senior Adviser & Head, Policy Coordination and Program Management Division, Department of Science and Technology, on “Changing Landscape of Research funding in India- Anusandhan National Research Foundation: India's Vision to Achieve Global Leadership.”
While implementational details were still sparse, a couple of points regarding the manner in which the ANRF sought to raise funds came to light. Out of the proposed INR 50,000 crore for the statutory body, INR 14,000 crore will be provided by the Union government. This amount will be allocated to the NRF Fund (10,000 crore), and the SERB fund (4000 crore). 10% of the NRF Fund will be earmarked as the Innovation Fund (1000 crore). Allocations made to R&D projects from the Innovation Fund will be granted exemptions under the General Financial Rules as well, although the exact details are still under wraps. While it was already known that the remaining INR 36,000 crore was proposed to be raised from industry, philanthropist foundations, and international bodies, the exact mechanisms, and incentive structures seem to be still a work in progress. The focus on the private sector and foreign bodies funding more than 70% of national R&D over 5 years is similar to the USA’s National Science Foundation, which also takes in significant private funding.
There was also an explicit focus on encouraging private sector CSR (Corporate Social Responsibility) contributions, which Dr. Gupta pegged at around INR 24,850 crore per annum. This will require amendments to the CSR rules to ensure sustained long term funding via this avenue, since at present, CSR contributions are only allowed to support research projects for up to 1 year.
The good intentions behind the establishment of the ANRF will have to be evaluated on the basis of its execution, but the sparse details emerging in the aftermath of the Bill’s passage do not do much to assuage concerns over India’s stagnated GERD, which has stood at 0.7% for the last two decades.
India Policy Watch : Learning What it Takes to Execute an Industrial Policy
— Vishwanath Madhugiri & Pranay Kotasthane
**This piece previously appeared on Anticipating the Unintended #224 here.**
On August 9, the US CHIPS and Science Act completed one year as a law. So, in an article for The Hindu, we proposed four lessons for India's semiconductor strategy (from a nuts and bolts perspective). Implementation is key to industrial policy, and the US experience has some lessons for our policymakers. What follows is the first draft of that article.
The United States’ Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) will complete one year as a law on August 9. The Act authorises $52.7 billion over five years to boost American competitiveness, innovation, and national security in semiconductors.
While the jury is still out on the long-term effectiveness of the Act, the industry body Semiconductor Industry Association claims that the Act has spurred announcements of over $210 billion in private investments announced across 20 American states and over 50 new ecosystem projects, including fabs.
What’s more important from an Indian perspective is to observe and learn from the implementation details of the Act. As industrial policy has become a default policy for choice for nation-states, the Act provides a clear window into the capabilities and structures needed to execute such policies. Behind the flashy headlines, the US is bringing to bear the full force of its mighty state capacity on semiconductors through the CHIPS Act. While it may neither be possible nor desirable to replicate specific provisions, we outline four lessons to help India execute its semiconductor strategy better.
A Truly Whole-of-Government Approach
The Act involves cooperation and coordination between several arms of the government. Four separate funds have been created for the execution of the Act. The Department of Commerce is the lead agency, administering the $50bn CHIPS for America Fund for accelerating semiconductor manufacturing and research. But there are also allocations for the Department of Defense ($2bn) for defence-unique technologies, the Department of State ($0.5bn) to coordinate with foreign partners on semiconductor supply chain security, and the National Science Foundation ($0.2bn) to promote the growth of the semiconductor workforce. This structure highlights the priority accorded to semiconductors.
On the other hand, India’s semiconductor industrial policy is being managed mainly by the Ministry of Electronics and Information Technology (MeitY). The schemes for manufacturing, assembly, displays, and compound semiconductors have been assigned to an independent division called India Semiconductor Mission (ISM) within a non-profit company set up by MeitY. The policy for chip design is being administered by C-DAC, an R&D organisation again under the MeitY. The ISM Committee comprises largely MeitY bureaucrats. Only the Advisory Committee reflects a broader representation from the government's technology, defence, and security arms. While the ISM is a good beginning, ensuring that the semiconductor strategy survives beyond government terms requires a whole-of-government approach along the lines of the CHIPS Act.
Workforce Development as a Vital Focus Area
Companies seeking funding under the CHIPS Act are required to submit workforce development plans. A nodal agency, the National Semiconductor Technology Center (NSTC), has been created to “collaborate with industry, educational institutions, government agencies, and government-funded research institutions to identify and scale gold-standard education models, experiential learning, and training programs that consistently meet industry needs”.
This must become a focus area for India as well. A competent semiconductor engineering workforce is India’s quickest route to gaining disproportionate leverage in the semiconductor industry. Keeping this in mind, MeitY has begun a Chips2 Startup (C2S) programme, collaborating with over 100 universities and colleges. Like the NSTC, C2S aims to scale up workforce expansion by supporting existing quality training programs. In the Indian case, however, many private training centres prepare chip designers outside the conventional university system. Hence, it’s important for C2S to focus on certifying good programmes of universities or private training institutes rather than running them.
Measures for Transparency in Decision-making
The US is establishing clear and transparent guidelines to assess the financial viability of the semiconductor project, as well as the applicant's technical competency, financial strength and track record.
The CHIPS Act has created a CHIPS Program Office(CPO) to lay down the guidelines for assessing the financial viability of a project. For example, the assessment would include the financial strength of the project and the applicant, a firm private investment commitment, and whether the funding request under the Act is reasonable. The applicants should also qualify for a state or local government incentive and have a signed term sheet. The CPO is hiring Investment Principals and Financial Structuring Directors to structure and catalyse private sector investments that complement the financing of those companies that have been awarded a contract, to support various components of the semiconductor industry. From the technology angle, the CPO has created an R&D Leadership Team that will design and oversee R&D programs that will help sustain a robust R&D ecosystem.
To ensure environmental sustainability requirements are adhered to, applicants must meet the provisions of the National Environmental Policy Act(NEPA). Further, for improving the sustainability of semiconductor manufacturing, several options are being explored to maximise equipment and process efficiency while minimising the usage of power, chemicals, water, and waste.
While India also has guidelines for assessing the viability of proposals, a lot remains to be done concerning transparency. For example, it is still unclear why some firms that showed interest in starting chip fabrication plants could not receive ISM approvals or consortia, such as Foxconn-Vedanta, could not bring technology partners on board, despite the fanfare associated with these projects. India needs to build the capacity to vet proposals. The government needs to put out regular monthly progress reports on its semiconductor programme. This will help manage expectations and instil reassurance in India’s plans.
Planning for the Future
The CHIPS Act is not just about bringing semiconductor manufacturing back to the US. The Department of Commerce also invests $11bn focused on future research. For example, the strategy acknowledges that advanced packaging is a leverage point to excel in semiconductors over the next decade. Hence, it envisages a National Advanced Packaging Manufacturing Program (NAPMP) to help the US gain a disproportionate competitive advantage in the future. Packaging was considered a labour-intensive and low-margin component of the supply chain only a few years ago. However, as downscaling transistors becomes difficult, researchers have zoomed in on advanced packaging techniques that combine multiple semiconductors in a multi-dimensional arrangement on a single substrate, all in one package.
In India’s semiconductor strategy, advanced manufacturing and packaging research are not priority areas of focus. This makes sense to the extent that India is currently nowhere in the picture in high-volume chip manufacturing. However, the lesson from the CHIPS Act is that India’s strategy needs to identify and invest in research on future technologies.
In sum, the CHIPS and Science Act is a useful template for industrial policy in semiconductors. The administrative capacity that the US has marshalled together institutionalises the Act in a manner that will ensure its continuity beyond governments. We urge that India’s semiconductor strategists study the positives and drawbacks of this Act deeply. After all, nothing matters more in industrial policy than effective implementation.
What’s on our Radar this Week?
[ Opinion ] China Economy: Has the export-investment-state-driven growth model reached its limits?, by Manoj Kewalramani
[ Podcast ] PuliyaBaazi - आज़ादी की राह: मैसूरु 1799 से 1947 तक। Mysore State during the British Rule Ft. Siddharth Raja
[ Opinion ] Chandrayaan will help us profit from the heavens, by Aditya Ramanathan